Q2 GDP 1.9%; Q4 GDP = -0.2%; New Jobless Claim +448k
Across the board, this was simply a horrible, recession set of data:
Initial Jobless Claims: 448k. That's the worst level since April 2003.
Q2 GDP: 1.9%, well below consensus of 2.3%.
Q4 GDP Revisions: Revised from +0.6 down to -0.2%; The first negative quarter (Don't say we didn't warn you) since Q3 2001.
Q1 GDP Revisions: Revised down to 0.9% from 1.0%
Note -- I expect these revisions will get revised even lower in the future.
Durable Goods:
Consumer Spending: Despite $100 billion in rebate checks, consumer spending was up only .56% -- the bulk of which was (undercounted) food and energy inflation. Nominal spending for the quarter was 3%.
Inflation: The personal consumption expenditure price index rose at a 4.2% annual rate.
Revisions: A major set of revisions, and nearly all were negative. The economy contracted in the last three months of 2007, providing the first negative quarterly GDP data. Q4 GDP 2007 was revised to a negative number from +0.6% to -0.2%. And, this is very likely to be revised even lower in the future.
Just nasty numbers across the board.
One last "surprise" -- Bill King observes that the GDP Price Index inexplicably tanked to 1.1% in Q2; 2.4% was expected. Nominal GDP declined to 3% from Q1's 3.5%. Thus, the Q2 GDP benefited by 1.5% points, thanks to the mysteriously collapsing GDP Price Index, down to 1.1% from Q1's 2.6%.
Hence, I expect Q2 2008 GDP to eventually get revised downwards to 0.4% -- or worse.
Here are the charts:
>
Real GDP Growth
Chart courtesy of Barron's Econoday
>
New Jobless Claims
Chart courtesy of Barron's Econoday
>
Larry, you have some 'splainin to do!
James, are you really going to make me wait for that Bladerunner DVD?
>
Previously:
Recessions Often Begin With Positive GDP Data (May 2008)
http://bigpicture.typepad.com/comments/2008/05/positive-gdp-re.html
Sources:
GROSS DOMESTIC PRODUCT: Second Quarter 2008 (Advance)
BEA, JULY 31, 2008
http://www.bea.gov/newsreleases/national/gdp/2008/gdp208a.htm
Summary of GDP Revisions
http://bigpicture.typepad.com/comments/files/summary_of_gdp_revisions.pdf
Related:
U.S. economy suffers fourth-quarter contraction
Revisions show spending slower, profits higher than previously thought
Rex Nutting
MarketWatch, 9:01 a.m. EDT July 31, 2008
http://www.marketwatch.com/news/story/commerce-dept-concedes-us-economy/story.aspx?guid=%7BB40570D2%2D40FB%2D45BD%2D8920%2DFEC19E1A1F26%7D
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Comments
OMG ... Jobless Claims up 44,000. How the hell do jobless claims increase 10% in one week? WTF?
Either it's an anomaly, or something has gone, very, very, wrong.
Posted by: Donny | Jul 31, 2008 9:09:13 AM
Man, it is downright amazing as to how UNmentioned those revisions were to the last 2 Qs. Another leg of the bull stool kicked out.
Posted by: mephisto | Jul 31, 2008 9:10:19 AM
the gdp price index looks surprisingly good....
Posted by: w | Jul 31, 2008 9:16:00 AM
Dow futures down 123. Maybe we are down 200 today. Tomorrow up 225. Monday down 160. Yawn. You keep presenting facts, BR. The market doesn't care anymore about facts.
I approved some guy writing the insightful comment "idiot" on my blog today, but it seems I am not the idiot.
Posted by: CNBC Sucks | Jul 31, 2008 9:17:51 AM
How common is it to have a revision bring the GDP from positive to negative? When is that last time that happened?
Posted by: Renting in Mass | Jul 31, 2008 9:18:37 AM
Heard from Jimmy P. regarding your bet, BR? I'll bet not. These guys never like to admit they're wrong.
Posted by: Jeff | Jul 31, 2008 9:23:37 AM
I don't suppose we will hear anymore of the CNBC permabulls pointing out that this can't be a recession because unemployment claims haven't reached 400,000. One more false scenario diescared.
Posted by: carl erickson | Jul 31, 2008 9:30:34 AM
Shame that 10 day MA on put/call is near 0.9. Sentiment is way too bullish to get slammed with data like this. Could see massive down day...300 points or more. The CNBC guy at Nasdaq seems very deflated.
What will be the argument of the no recession crowd now? That we only had one negative qtr, then rebounded so it is no recession? The stimulus checks artificially pulled some demand in from the future. But the price to be paid is a half trillion deficit.
Posted by: Steve Barry | Jul 31, 2008 9:34:30 AM
Saw CNBC promo for Mad Money yesterday that strongly hinted that Cramer was THE one guy last August, through his famous rant, that signaled problems coming in credit markets. My memory isn't perfect...but that is not quite how I remember that. That rant came as things were well on their way to blowing up. Now Cramer called the market bottom yesterday. What a signal to short the hell out of it.
Posted by: Steve Barry | Jul 31, 2008 9:42:34 AM
My memory ain't what it used to be either, but it's still pretty good (ask my wife). Cramer was still calling DOW 14,500+ by the end of '07 AFTER his rant. He still thought it was up, up, up all the way even after things went sour in October after the highs. Trust me, this guy revises history ALL the time. He is often right about certain stocks (but, hey even a monkey can pick some good ones once in a while), but he was dead wrong on this. Sure, he threw a little trantrum last August, but he was very very late to the game admitting the broader implications of this mess on the wider economy and markets. Every time I see that promo now, it makes me sick because most people won't realize how wrong he was on the bigger point
Posted by: Jeff | Jul 31, 2008 9:50:09 AM
And of course the markets are climbing their way off their lows - Dow down only 66+ right now. Someone said it earlier - obviously people either haven't looked at the data, or don't understand it, or simply don't care. It's buy, buy, buy all the time regardless of the data or fundamentals. Keep on buying. This ain't the bottom. Not even close. Just more ETF shorting opportunities for the rest of us, assuming Cox doesn't make those illegal as well.
Posted by: Jeff | Jul 31, 2008 9:53:44 AM
The Desk started the day with 5b in repos. It quickly added two more for 10b and 8.75b. The TSLF for this week is 50b. They will stop at nothing to keep up the dream (or better yet nightmare) alive.
Posted by: Juhuti | Jul 31, 2008 10:03:03 AM
Sort of interesting how CBNC is "celebrating" the one year anniversary of the "credit crisis." The implication is that things really started to go to hell back in July/Aug last year. What nobody is pointing out is the humourous way the SP500 hit a new high later in the year and actually peaked in Oct 2007.
I use the 15% rally from Aug07 to Oct07 as EXHIBIT A that markets are not efficent and it's not a random walk. For the market to rally to new highs in the face of an unraveling credit bubble and weak housing market was just ridiculous.
- AT
Posted by: Andy Tabbo | Jul 31, 2008 10:11:50 AM
A moment of lucidity just hit Erin Burnett...it bothers her now that Visa and Mastercard are making money by extending credit and have sold the risk of default to other parties. Sounds a bit like sub-prime, huh? Big difference though...you can't foreclose or repossess a tank of gas...a vacation...a Chinese restaurant meal. TOTAL LOSS.
Posted by: Steve Barry | Jul 31, 2008 10:12:43 AM
Does anybody know a service that gives a cross reference between stocks and ETFs? I'd like to know which ETFs own a particular stock. TIA.
Posted by: mhm | Jul 31, 2008 10:15:03 AM
Individuals and the country are just burying themselves in more debt to play the old Dean Smith "four corners offense" until the next bubble is created by the next media-dubbed "Maestro". It won't work this time.....
Posted by: Jeff | Jul 31, 2008 10:15:46 AM
That great used car salesman of the stock market, Bob Pisani, just said the Dow (at -66) was off its lows because of the July Chicago PMI data. See! All you need is one quarter-sliver of hope and that's enough to convince "them" to buy. You can't bet against "them" especially since "they" won't allow certain (or all?) stocks to be shorted anymore. I am also amazed how well AMERICAN traders have been bashing down oil prices the last few weeks. I notice oil goes down the most during US trading hours. It's great for the American stock market, but that just gives China the opportunity to hoard oil at these bargain basement prices. If the Chinese had just built their reserve infrastructure by now, these oil prices would not have dropped.
Posted by: CNBC Sucks | Jul 31, 2008 10:16:20 AM
Does anyone have an intelligent explanation why the ATA (American Trucking Associations') Truck Tonnage Index has posted 8 straight months of y/y gains with Tuesday’s report of June being the largest %increase in over three years. This seems counterintuitive to me given the slowing U.S. economy. Thanks in advance.
Posted by: Dave | Jul 31, 2008 10:16:41 AM
Actually this is GREAT news for the market! It gives cover for Uncle Ben to LOWER rates 50 more bps, AND it means "all the bad news is out" so we can go much higher from here!
OK, can I get a job with CNBC now? :~)
Posted by: dave c. | Jul 31, 2008 10:27:22 AM
re dave:
don't know if it's an intelligent comment ...but suspect less driving to the mall shopping and more online ordering/shipping to avoid state and local sales taxes. I would note they don't seem to upbeat yet either:
"ATA Chief Economist Bob Costello said June’s solid tonnage reading matched several anecdotal reports from motor carriers. Despite the uptick, however, he noted that it remains a close call whether the general economy will dip into a recession later this year or if it will only slow significantly.
“It seems that truck tonnage is once again leading the U.S. economy,” Costello said. “During the 2000-2001 cycle, trucking pulled out of a recession before the aggregate economy fell into one. Unfortunately, truck tonnage could slow later this year as the overall economy is expected to be quite weak in the fourth quarter and the first quarter of next year.”
I hope this helps
Posted by: w | Jul 31, 2008 10:31:32 AM
The purveyors of the so-called dismal science are sometimes inadvertantly funny. To wit:
“First-quarter growth was little revised (0.9% from 1.0%), but the 2007 fourth quarter was revised to minus 0.2% from plus 0.6%, making the downturn look much more like a “W”-shaped recession, according to S&P Economics.”
Let’s hope the media remembers to call it the “W” recession once the next President is in office so we’ll remember that this mess is the legacy of George W. Bush.
Posted by: Monica Starr | Jul 31, 2008 10:34:00 AM
Gee, seems like it was just yesterday that the market jumped bigtime largely on rumors of an "unexpected increase" in the employment numbers from ADP, and the TV talking heads were crowing about it. In light of all the recent BKs and layoffs, that just didn't make sense, and I was suspicious that there was some bullshit being tossed out anonymously in order to goose the market up.
Wait, that WAS yesterday.
Posted by: bluestatedon | Jul 31, 2008 10:40:50 AM
They won't remember that this was/is clearly W's recession because nitwits like Bowyer and Luskin will have perfected their talking points that it's Obama's fault, except of course if McCain wins. Then it's the Dem congress' fault. And what's worse is, that much of the gullible, ill-informed, lazy public will buy it.
Posted by: Jeff | Jul 31, 2008 10:47:10 AM
Gee, I guess the ADP report may have been optimistic.. ??
Yesterday's nonsense was a gift for bears, surely there is NO WAY that tomorrow's NFP number will reflect the "+ 9000" jobs "created" in ADP survey. Who are these ADP clowns anyway?
With a 440,000 initial claims, who would bet against a -100,000 number tomorrow? That would certainly stretch the credulity of Cramer's bottom call. Cramer + Luskin + Kudlow = a perfect contrary indicator.
The ongoing rise in unemployment is death to commercial RE, retail, and energy stocks (no more driving to work if you ain't got a job, no more delivering stuff in trucks if people are not buying, no more heating and cooling empty offices).
Next time the market falls sharply, it will be interesting to see what happens. As a mini-rally develops, shorts will cover and... OH WAIT, they smoked out the shorts, now there is no-one left to save the banks from oblivion !!! Be careful what you wish for.
Posted by: leftback | Jul 31, 2008 10:53:56 AM
W. Yes GDP inflation was very good only up 1.1%. But that of course is the amount of inflation produced domestically. As if anybody gave a flying fig where inflation comes from.
Overseas inflation? Not so much. Up 28%. Personal Consumption inflation up 3.7% y/y the most in 18 years.
Posted by: Michael Donnelly | Jul 31, 2008 10:55:48 AM
